Former, present army chiefs rapped in defence ministry audit - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Wednesday 24 October 2012

Former, present army chiefs rapped in defence ministry audit

The generals complain about excessive financial oversight. They have only themselves to blame as it is set to become even more onerous

By Ajai Shukla
Business Standard, 24th Oct 12

A wide-ranging audit by the defence ministry’s official auditors, the Controller of Defence Accounts (CDA), has sharply criticised the mismanagement of funds by the army’s senior-most commanders. Former army chief (and now anti-corruption crusader) General VK Singh, and the current army chief, General Bikram Singh, are amongst those that the CDA incriminates in financial mismanagement.

Defence Minister AK Antony has responded by curbing the financial powers of army commanders. These generals must now clear proposed purchases from a Financial Advisor (FA), who will be a civilian official in the MoD. The army often complains about excessive financial oversight; now this is set to become even more onerous.

Business Standard has reviewed a copy of the CDA’s audit report, which has not been made public by the MoD. The MoD and the army both declined to comment on the report and its fallout.

The audit relates to special funds allocated to the army’s six theatre commanders, including money that they can expend under the Army Commander’s Special Financial Powers (ACSFP) for “urgent procurement in situations of operational urgency”. This is not the first time that mismanagement of these funds by senior generals has been flagged. In 2008, then army chief General Deepak Kapoor allegedly scuttled a probe into his expenditure of these funds during his tenure as northern army commander. Kapoor’s famously upright successor, Lt Gen HS Panag, who initiated the probe, was summarily shifted from northern command to central command.

The defence minister had backed General Kapoor in 2008, but this time Antony himself has ordered the CDA, the MoD’s apex accounting and audit body, to audit the expenditure of special funds by the army’s theatre commanders. The northern army commander, engaged in year-round operations, has the largest annual budget of Rs 125 crore. The eastern army commander gets Rs 50 crore per annum. The western, south-western, central and southern army commanders get Rs 10 crores each.

Operationally committed commands also get “General Service funds”, meant for generating military intelligence. These funds, which amount to tens of crores, are not subject to any audit.

General Bikram Singh, the current chief, and his predecessor General VK Singh, both commanded the eastern army during the period that the audit covers: 2009-2010 and 2010-2011.

The CDA audit, which covers 55 financial transactions, reports violations to the tune of Rs 103 crores. Worryingly, this might be just the tip of the iceberg. The audit report notes that, “None of the Army Commanders have furnished complete data on the total number of cases where delegated financial powers were exercised by them under various heads. They have forwarded data relating to those sanctions only which costed Rs 50 Lakh and above.”

The vast majority of irregularities relate to the Northern Command. Bizarrely, the purchase of milk forms a major component of the auditors’ objections. But the CDA has also pointed to the purchase of items from “trading firms/agents instead of directly from OEM vendors,” in violation of army regulations. The audit report also notes that the supply of these items is delayed “in practically all cases.” This, according to the report, “substantially defeated the objective for which these (financial) powers were delegated to command HQrs (headquarters).”

The CDA audit notes the fact that the failure of regular military procurement channels often forces army commanders to make emergency purchases under special financial powers. It states that, “If stores are made available in time, it would not be necessary for Army Commanders to exercise these powers.”

Defence experts point out that the army’s logistics system remains a relic of the 1950s and 1960s, when few supplies were available in remote border areas. The tradition of central, rather than local, logistics still continues, even though areas like Ladakh and Arunachal Pradesh now have significant local infrastructure.


  1. well... things are moving... now to fix responsibilities... for each action taken... thats the true... spirit of uniform...

  2. Dear Colonel,

    It seems that you are convinced that the report is a confirmation of fraud.

    Should the Generals have continued to wait instead of taking action to mitigate the problems of the men under their command?

    Do you expect that OEMs to open shop in the Valley for a business of few lakhs or crores in some cases? How much will they pay to the administartion to get permission to set up shop? And will 370 permit them to set up a sizeable business in valley?

    You of all people must understand the problems that army faces. So please include their side of story in your reports as well.

    Jai Hind

  3. Ajay, it is indeed agonising to once again read/hear about yet another 'scam', in the army, if wasteful expenditure can be called one. I too believe that the army (armed forces) can no longer be treated as a 'holy cow', but neither is it fair to blaze headlines about their purported misdoings without hearing their side of the story. I notice that of late, the INDIAN MoD has declared open season on the INDIAN armed forces. Not for a moment am I condoning any 'corruption', but there is a systematic effort afoot to defame the men in uniform and bring them down in the eyes of the Indian public. The guilty must be punished and more severely than their civilian counterparts...but first do give them a chance to expound their version, before pronouncing them guilty. Even the rapacious, who are being exposed every day, get a chance to prove their innocence. For a man in uniform, his izzat is more precious to him than his we need to be a tad more patient before rushing to meet the deadline of 'breaking news' . Would the panacea be to dismiss the entire armed forces and let the 'honest' dhotiwalas and babus replace them to defend the nation, as ludicrous as it sounds! God forbid. Remember, the only reason the Indian soldier is ready to lay down his life is because he is motivated. Shorn of this attribute, his paltry salary package, working conditions etc cannot compensate for this virtue. The MoD and our responsible media needs to respect that. I know you will.
    Parvez Khokhar

  4. Sir,
    The more powers that Financial Advisers(FA) are going to have, the more miserable is going to be for the armed forces. It will become a gigantic task to spend budgetary allocation.CAG authorities will have no clue on the operational requirements of the forces. Their perception will be completely on financial angle. It's the commanders who need to think on the morale of the men under him and he is a wise man having spent 30+ years in service

  5. Presently it can not be said that how much real or political it is.

  6. The army brass has only itself to blame for this mess.

    Going forward, Army Commanders must be answerable for their usage of "special funds" - irrespective of whether the General officer is serving or retired.

    It would be interesting to see what disciplinary action is taken against the erring Generals based on this report.

    The COAS is crying himself hoarse lecturing the Army on "back to basics" , discipline, moral values et al. What moral platform can he stand on now??

    The only fallout i see will be the MOD tightening the screws and increasing its control on the Army.

  7. "The vast majority of irregularities relate to the Northern Command. Bizarrely, the purchase of milk forms a major component of the auditors’ objections"

    Jesus christ now there is irregularity because milk was purchased....which Army commanders traded to buy their own buffalos and start their own farms. Looks like a serious misuse of funds or another way for babus to control the army further

  8. Col.Shukla please read Gen.PC Katoch's article and hopefully provide us your take on it given you were part of the track2 diplomacy to give away Siachen. Btw i have never understood why should we negotiate any demilitarisation? Our army is fine being there(atleast none of the chiefs have complained) and the pakis are the ones in trouble is this again a case of our great ability to snatch defeat from the jaws of victory

  9. @ Anonymous 11:10

    If you have indeed understood that there is no need to demilitarise Siachen, then you have probably understood it by reading my writing.

    There is a "Search" button on Broadsword. Type "Siachen" there, press Enter, and then read everything that I've written on the subject. Then decide whether I sound like a guy who's going to "give away Siachen".

    Some jerk writes some article... and it becomes the gospel truth?

  10. Col.Shukla jerk=Lt.Gen Katoch here?

  11. Dear Sir,

    Allow me to post a link of a write up by Maj Gen Mrinal Suman on the issue. I am sure even you would find it hard to disagree.
    And yes it was disappointing not to hear your own views (which can't possibly be too different from Gen Suman's) on the issue rather than just providing another 'story' like many of the ignoramuses in the media who can't tell a jawan from an officer ( )

    Gen Suman's write up rebutting the audit report is given below:-

  12. Shukla back again to his old pastime - bashing V K Singh. You are hilarious Shukla. You ask others to research but you yourself present half-baked truth - the usual trick by jurno's to grab headlines. OH NO you are a Soldier


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